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Mark Zuckerberg’s crypto dreams dead as Diem gets sold

Mark Zuckerberg’s cryptocurrency dreams are officially dead. The Meta-backed cryptocurrency venture Diem said late Monday that it had sold off its assets to Silvergate Capital, a crypto-focused bank in California, after regulators including the Federal Reserve opposed to the project. The value of the sale was about $200 million, The Wall Street Journal and Bloomberg reported. Meta reportedly controlled about one-third of Diem, which was launched in 2019 under the name Libra and was also backed by Uber, Shopify and venture capital firms including Andressen Horowitz and Union Square Ventures. The group’s plan had been to issue a so-called stable coin: a cryptocurrency that would have been pegged to the US dollar. Backers of stablecoins argue that they can revolutionize finance by offering the lightning fast transaction speeds of cryptocurrencies without the price volatility of bitcoin or ethereum. But regulators and politicians had expressed opposition to allowing a cryptocurrency backed by a scandal-plagued company like Meta play a key role in the global financial system. In November, a report from the US Treasury with contributions from the Fed, the Securities and Exchange Commission and the Commodity Futures Trading Commission called on Congress to regulate issuers of stablecoins like banks, warning that they pose risks like “destabilizing runs, disruptions in the payment system, and concentration of economic power.” The nail in Diem’s coffin appears to have come from the Fed. In a series of meetings in 2021, Federal Reserve officials told Diem and Silvergate — which was then planning to help Diem issue its stablecoin — that they could not guarantee they would let the project go forward, Bloomberg reported. Diem and Meta did not immediately respond to requests for comment on the sale. In a Twitter thread on Monday, Diem co-creator Christian Catalini suggested that Silvergate would still go ahead with plans to issue a stablecoin. 11/13 Today we pass the baton to Silvergate. They have been one of the first Federal Reserve member banks to understand the potential of crypto, and are now in a great position to bring a stablecoin to market that follows the PWG framework.— Christian Catalini (@ccatalini) January 31, 2022 “Today we pass the baton to Silvergate. They have been one of the first Federal Reserve member banks to understand the potential of crypto, and are now in a great position to bring a stablecoin to market that follows the PWG framework,” Catalini wrote, in reference to the stablecoin regulation recommendations released by federal regulators in November. Another Diem co-creator, former Facebook executive David Marcus, appeared to suggest that politicians had unfairly targeted Diem due to its association with Zuckerberg and Meta and that the project would have been approved if it were backed by a less controversial company. “Here’s to yet another chapter with a maybe more ‘acceptable’ promoter driving the vision forward,” wrote Marcus, who left Diem in 2021. “There will be ample time in the future for me to properly reflect on the behavior of certain politicians and regulators along the way, but for now… onward!” Here’s to yet another chapter with a maybe more “acceptable” promoter driving the vision forward. There will be ample time in the future for me to properly reflect on the behavior of certain politicians and regulators along the way, but for now… onward!— David Marcus – dmarcus.eth (@davidmarcus) January 31, 2022

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